October 7, 2010 / 2:15 PM / 9 years ago

Ex-NY comptroller Hevesi pleads guilty in pension scam

NEW YORK (Reuters) - Former New York State Comptroller Alan Hevesi on Thursday pleaded guilty to a felony corruption charge for his role in a pay-to-play scheme involving the $132 billion state pension fund.

Alan Hevesi is seen at a press conference in New York, January 7, 2005. REUTERS/Chip East

Before New York Supreme Court Judge Lewis Bart Stone, Hevesi pleaded guilty to a Class E felony of receiving a reward for official misconduct. The judge said Hevesi will cooperate with the continuing probe. A Class E felony carries a maximum prison sentence of four years.

“I deeply regret my conduct and sincerely and deeply apologize to the people of New York,” Hevesi told the court on Thursday.

New York Attorney General Andrew Cuomo’s long-running investigation has now resulted in seven guilty pleas, including Hevesi’s chief investment officer, money managers, a placement agent, and the former head of New York’s Liberal Party, Raymond Harding.

Much of the investigation has focused on politically connected placement agents or brokers who reaped rich fees from investment companies that they helped get hired to manage the state’s money.

The probe of Hevesi intensified after a California venture capitalist, Elliott Broidy, pleaded guilty to a felony for bribing four top officials in the state comptroller’s office.

Hevesi admitted in court on Thursday that he took overseas trips to Italy and Israel that were paid for by Broidy. The trips, including one to California, were worth $75,000.

The former state comptroller also got the benefit of $380,000 of fees paid to a lobbyist and $500,000 in campaign contributions.

This is not Hevesi’s first brush with public disgrace. He resigned from his state office in 2006 and pleaded guilty to an unrelated charge for misusing state drivers to chauffeur his ailing wife.

ENDING THE PIGGY BANK GAME

Cuomo, the Democratic gubernatorial candidate, has charged that the state’s pension fund became a piggy bank for Hevesi’s top political aide and fund raiser, Henry Morris, who reaped millions of dollars in fees from individuals and firms seeking to invest the state’s money.

Cuomo’s investigation into middlemen such as Morris has proved a game changer, prompting a national crackdown on placement agents.

New York, for example, has banned placement agents. The state also has imposed a two-year ban on any investment company seeking to manage state pension money — if it donated to politicians running for state comptroller. The New York state comptroller is the sole trustee of the state pension.

Morris, whose lawyer has said he is innocent, is expected to stand trial on charges, including money laundering, bribery and violating the Martin Act, the state securities law.

The case has swept up high-profile players in the hedge fund and private equity world, including The Carlyle Group and Steven Rattner, who resigned as the head of the Obama administration’s auto industry task force as Cuomo’s probe deepened. The investigation of Rattner, who co-founded private equity firm Quadrangle Group LLC, is ongoing, a source familiar with the matter said.

Other states, including New Mexico and California, have begun their own investigations.

Reporting by Joan Gralla; Additional reporting by Edith Honan; Editing by Jeffrey Benkoe and Jan Paschal

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